A recent study by the Stanford Graduate School of Business in collaboration with BoardSource and GuideStar found that although many nonprofit organizations devote significant efforts to measuring performance, nonprofit directors say the efforts are falling short.
Performance measurement needs to assess both financial efficiency and how well the nonprofit is meeting organizational goals and achieving its mission. However, while 92% of the nonprofit directors surveyed said their boards review data and information to evaluate organizational performance, 46% said they have little to no confidence that the data they review fully and accurately measures their organizations’ success in achieving their missions.*
With this information in mind, the authors of the study made these recommendations:
- Make sure your board and other key stakeholders understand and embrace your mission
- Establish specific goals and strategies tied directly to achieving your mission
- Develop rigorous performance metrics that reflect those goals and strategies
Developing Performance Metrics
To develop effective performance metrics, start by grouping your activities.
Inputs. These are key tangibles and intangibles that drive your organization, such as your mission or vision statement, financial resources, personnel, and information systems and infrastructure. Possible metrics to measure inputs include:
- Percentage of strategic priorities aligned with the mission statement
- Operating revenue as a percentage of costs
- Percentage of activities documented and measured
Activities. Include all of your specific programs and services and related tasks, such as disseminating information, education, research, advocacy, and networking. You might measure these by:
- The money you spend providing aid and support to the community
- Employee productivity
- The increase/decrease in the number of community members participating in your programs and services
Outcomes/Impacts. You need to know, and donors want to know, how your programs and services have changed your clients’ lives and benefited society as a whole. Use metrics specific to your programs and services. Examples include:
- Percentage of clients placed in jobs or jobs created in a year
- Percentage of area low-income children placed in early education programs
- Number of college scholarships provided
- Number of disaster-damaged homes repaired
- Lives saved by medical services
- The percentage of beneficiaries reporting major improvements in the quality of their lives
Combining easier-to-measure financial performance with measures of mission success can give you a better picture of your organization’s success and how it impacts the communities you serve.
If you have any questions about your nonprofit organization’s performance and mesauring success, please contact Warady & Davis LLP at (847) 267-9600.
* 2015 Survey on Board of Directors of Nonprofit Organizations, Stanford Graduate School of Business and the Rock Center for Corporate Governance